The recently closed renounceable rights issue by Key Insurance Company Limited has pulled in $668 million from shareholders, just $2 million shy of the original target of $670 million.
The renounceable rights issue, which opened on December 11, 2020 and closed one month later on January 11, 2021 saw up to 190,863,000 new ordinary shares being created at a subscription price of $3.50 per share. The company had reported that it wanted to raise $670 million by offering existing shareholders the right to subscribe for additional shares, in proportion to their existing shareholding via a rights issue.
Under the rights issue, new ordinary shares in Key Insurance have been provisionally allotted to the company's existing ordinary shareholder in the proportion of 259 new ordinary shares for every 500 existing ordinary share units held at a subscription price of $3.50 per share. The offer of shares was renounceable, meaning that existing Key Insurance shareholders can assign their right to these shares, wholly or in part, to others, whether they are shareholders in the company or not.
Excess shares was placed in an excess shares pool and was to be made available to Key shareholders, who have indicated that they wish to acquire more new ordinary shares than their allotment. GraceKennedy (GK) had previously confirmed that it will be taking up its full allotment of new shares from its 65 per cent shareholding in the company, which is now a GK Insurance subsidiary, having been taken over by the GraceKennedy group in March last year.
The money raised would provide much-needed capital for the company and strengthen its capital base, which is seen as critical at this time considering the deterioration of the company's minimum capital test ratio over the years.
DETAILS OF ALLOTMENT
Key Insurance has confirmed that all subscribers got 100 per cent of their subscription requests. The basis of allotment is as follows:
1. Existing ordinary stockholders were allocated 100 per cent of their provisional allotment of new ordinary shares
2. Existing ordinary stockholders were allocated 100 per cent of their application for new ordinary shares in the excess shares pool
3. Renouncees were allocated 100 per cent of the provisional allotment of new ordinary shares held by existing ordinary shareholders renounced to the renouncee.
Key's authorised share capital was increased to 700 million shares at its annual general meeting late last year with a mandate allowing the board to issue a minimum of just over 122.8 million shares for the renounceable rights issue.
STRENGTHENING THE CAPITAL BASE
The rights issue is just one component of the overall strategy implemented by the board and management team of Key Insurance aimed at strengthening the company's capital base so as to ensure regulatory compliance and future growth. Another component of the strategy is the divestment of real estate.
Key has also entered into an agreement for the divestment of its investment property located at 18-22 Knutsford Boulevard. The sale of the property will be completed in the first quarter of 2021.
Key Insurance got a much-needed lifeline when it was taken over by GraceKennedy, which pumped millions of dollars into the company to shore up its finances. Since GK's acquisition, Key Insurance has attracted 330 new shareholders, taking the total to 501 as of October 21, 2020.
In addition, the company has seen a 357 per cent increase in market capitalisation, moving from $774 million to $3.5 billion. Following years of sustained losses and a breach of its regulatory requirements, Key Insurance is turning a new leaf as the GK-led subsidiary, growing its premiums by 20 per cent to $402 million during its third quarter.
In less than six months of gaining full control of Key Insurance, GK's strategic initiatives and turnaround plan have borne fruit with the company, which recorded a small net profit of $5.7 million for the third quarter compared to the losses for the same period in 2019.